When the Fed Increases the Money Supply, We Expect

question 141

Multiple Choice

When the Fed increases the money supply, we expect

• A)interest rates and stock prices to rise.
• B)interest rates and stock prices to fall.
• C)interest rates to rise and stock prices to fall.
• D)interest rates to fall and stock prices to rise.

---

Definitions:

Marginal Cost

The extra cost incurred by producing one more unit of a product or service.

Marginal Benefit

The extra value or contentment obtained when one more unit of a good or service is consumed or produced.

Positive Externality

A benefit that is enjoyed by a third-party as a result of an economic transaction.

Spillover Benefit

An advantage that results from an activity or product but benefits those who are not directly involved in its production or consumption.